Marketing - Price
Strategies and adjustments

Price is the amount of money charged for a product or service or the value exchanged for the benefits of the product or service. 

For a new product, you must understand your positioning before you set a price. Make sure it is not too low, or the product will not be taken seriously. If it is too high, the potential customer will not take the risk. 

Pricing Strategies 

There are five general pricing strategies: 

Product Line: Setting price steps between product line items 

Optional Product: Pricing optional or accessory products 

Captive Product: Pricing products that must be used with the main product 

By-Product: Pricing low value by product to get rid of them 

Product Bundle: Pricing bundles of products sold together 

New Product Pricing 

There are two new product pricing strategies: 

Market-Skimming: Initially set high prices to "skim" revenue layer by layer from the market. Works when: 

• Quality and image support the higher price
• Enough buyers want the product at that price
• Cost of producing a small volume cannot be high
• Competitors should not be able to enter the market easily

• Market is highly price sensitive
• Production and distribution costs fall as sales volume increases
• Low price must help keep out the competition

The following are price adjustments based on changing situations: 

Discount & Allowance: reduced prices to reward customer responses such as paying early or promoting the product 

Discriminatory: adjusting prices to allow for differences in customers, products, and locations 

Psychological: adjusting prices for psychological effects. Ex: $299 vs. $300 

Value: adjusting prices to offer the right combination of quality and service at a fair price 

Promotional: temporarily reducing prices to increase short-run sales 

Geographical: adjusting prices to account for geographic location of customer. 

International: adjusting prices in international markets 

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